December 19, 2013 / 1:55 AM / 4 years ago

CORRECTED-UPDATE 3-Brazil's Gafisa sees debt down, launches up in 2014

(Corrects to say 2014 guidance-per-segment to recover vs 2013 in paragraphs 1-3)

By Asher Levine

SAO PAULO, Dec 18 (Reuters) - Brazilian homebuilder Gafisa SA plans to rein in expenses next year as it seeks to cut debt, launch more projects in some segments and boost profitability, executives said on Wednesday.

The company’s Gafisa unit, which builds mid-priced homes, will launch between 1.5 billion reais ($647 million) and 1.7 billion reais worth of new projects next year, while its Tenda unit, aimed at low-income buyers, will begin between 600 million reais and 800 million reais in projects, executives said at an investor event on Wednesday.

The estimates for launches in both segments are higher than the guidance for 2013. Management project launches at the Gafisa segment between 1.15 billion reais and 1.35 billion reais this year, with Tenda delivering between 250 million reais and 450 million reais worth of new projects in 2013.

Gafisa shares rose nearly 5 percent to 3.67 reais.

Gafisa embarked on a turnaround strategy in October 2011 after a rapid expansion into untried markets led to huge cost overruns, sales cancellations and big quarterly losses. Since then, the company has reduced expenditures and temporarily halted launches in the Tenda unit so it could focus on selling off unprofitable inventory.

Net debt is likely to reach between 55 percent and 65 percent of equity next year, a sharp drop from 126 percent at the end of September, Chief Executive Duilio Calciolari said at the investor event.

It will use proceeds from Gafisa’s sale of a 70 percent stake in its high-end Alphaville unit to repay maturing debt, pay shareholders a one-time dividend and buy back stock.

“We had determined that our leverage had gotten out of our hands due to operational questions, (that it was) not a question of financial discipline,” Calciolari said.

He added that expense controls will be strengthened. “Now financial discipline continues but operational control goes along with it.”

Financial expenses are likely to represent just 7.5 percent of the total value of new construction for the Gafisa brand in 2014 and 2015, according to a securities filing on Wednesday. Tenda has no target next year, but in 2015 its financial expenses should come to 7 percent of new construction.


Tenda resumed launches earlier this year with a new business model under which presales could only be booked if mortgages were able to be transferred to financial institutions.

“We see Tenda as basically a start-up now,” said Rodrigo Osmo, head of the unit. “It’s at a moment where it needs to prove its business model.”

Osmo said most of the old unprofitable projects should be delivered by mid-2014 and that the company’s optimal size should be over 1 billion reais in annual launches.

Calciolari said the company expects to reach combined return on capital employed - a gauge of financial efficiency - of between 14 percent and 16 percent at its Gafisa and Tenda units over about three years.

$1 = 2.32 Brazilian reais Reporting by Asher Levine; Editing by Guillermo Parra-Bernal, Nick Zieminski, Jeffrey Benkoe and Kenneth Maxwell

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